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Muhammad Qamar1
Pakistan went to the IMF1
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National University of Computer and Emerging Sciences, Islamabad

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It all started in 1958 when Pakistan went to the IMF to request for a loan. The IMF in
response agreed. Since then Pakistan has gone to the IMF a lot of times to request a
loan due to their economic instabilities, when the country became war torn, and also
when the country was running short on reserves. Other than this there were various
reasons for Pakistan’s occasional visit to the IMF for a loan. In the 1980’s and 1990’s,
Pakistan went thorugh severe economic difficulties, which caused the Implementation
of several IMF sponsored policies. So, Pakistan received loans from the IMF which
plays a huge role in keeping the country’s economy stable. In the late 80’s An
approximate of $500k was loaned by Pakistan by the newly formed democracy at the
time with the intention to adjust facilities in the country. It was the 1990’s, when one
of Pakistan’s all time great Benezir Bhutto went to the IMF for more loans. DEspite
all the loans taken by Pakistan in the this tiny era, poor handling of the economy and
money continued. This was only the one of many times Pakistan’s government went
to the IMF. In the 2008 global financial crisis, Pakistan was experiencing severe
external shocks which was taking a toll on Pakistan’s economy. To assist in
stabilizing Pakistan’s economy, the IMF gave an approximate of $7.6 billion was
provided by the IMF. Despite structural weaknesses in Pakistan and problems with
policy implementation this financial aid helped in stabalizing Pakistan’s economy. In
about 5 years time Pakistan joined an IMF initiative aimed to address growing
economic issues such as lack of reserves, shortages of energy, and fiscal imbalances.
This reform initiative manged to gather $6.6 billion from the IMF. The main aims of
these initaives were to strenghten the banking system’s, budget control, and changes
in the energy sector of the country. This helped the economy but faced a lot of
opposition due to structural changes. In 2018, Pakistan/s foreign exchange reserves
were declining and were also going through payments issues. SO another IMF loan
was taken which amounted to $6 billion. This was to fund even nore structural
changes in previous to previous ones in hope to ensure long term growth. The reason
for these were to enhance the business environment, increase revenue, and bosst fiscal
management. One of the times where the entire world suffered all together was when
Pakistan received a loan.during 2020’s globa pandemic.Durig this time countries
suffered due to lack of trade, extra costs of healthcare, etc. Pakistan was also one of
these victims which were strongly damged. To help fund these the IMF loaned out
around a billion dollars to Pakistan to support financial needs during this tough time.

Pakistan’s neighbor India also has history with the IMF with their first ever loan
dating back to 1957. This amount was 72500 SDR. But in our case, let us date back to
1991 when India’s exchange rate was facing major changes. The government of India
used up their reserves to slow down the decrease in value. When the reserves were
nearly finished their exchange rate fell hard and fast against major currencies
worldwide. All of this was caused by an imbalance of payments issue.
Overexpenditure desite having high amounts of debt and trade deficits at that time
also was a reason for this economic downfall of their exchange rate. A major factor
which contribued to this downfall was restrictions on trade at that time. Due to the guf
war there were a lot of trade restrictions, lowering oil supplies and increasing costs
despite reduction in supply of oil. Also adding to the pain was that they were also
going through political instability in which they were not allowing important changes
according to IMF policies. Because of this liberalization policies started coming into
place and the govt. of india started asking other countires for help in this situation. As
a result, several economic reforms started taking place be encouraging participation
from the private sector, , liberalizing the economy, and bringing in foreign

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investment. In the end IMF provided a loan of $2.2 billion to India to help their
economy. The next time of dire need for India came in 2008 after the global financial
crisis which had its effects. Similar to Pakistan, India was affected by external shocks
which was leading to a downfall in the economy.In addition, a decrease in demand for
exported goods and a shortage of foreign money and reserves put pressure on the
economy.
The pressure was increased by concerns about banks having high vulnerability and
fluctuations in the stock market. This decreased economic growth which led to
unemployment in India. This was also caused by a balance of payments so the
government of India asked for a loan from the IMF. In response, The IMF granted
India a loan of $2.6 billion which helped them rebuild their economy in the face of
uncertainty and rebuild investor confidence. After that rebuild, India cheived a lot of
economic success up until 2020 when the world was hit by a severe pandemic which
led to economies around the world struggling. India just like the majority of the world
had to face huge amounts of losses and a high cost of health care during the pandemic
needed financial aid from the IMF. Not only were the costs really high, international
trade was very severely affected by this global pandemic and India which is one of the
major exporters on the planet was facing difficulties in doing so with being unable to
keep up due to the pandemic. The IMF in the end gave India a $4.2 billion loan under
the Rapid Financing Instrument to help stabilize its economy. improve its response to
healthcare emergencies and crises, and companies and families which are already
running on government aid.

Well obviously these loans are not just handed out to countries for fun. The IMF
while giving out these loans impose conditions on the countries they loan out to.
Since Pakistan is one of the lenders of the IMF there were conditions imposed on
them. For Pakistan, there are fiscal reform requirements such as Budget deficit
reduction, tax revenue growth, and rationalization of government spending. The goal
of this is to improve sustainabiity and making Pakistan less dependant on external
loans. With the IMF’s financial aid, Pakistan was required to carry out structural
reforms like opening up markets, liberalizing trade, and privatizing public companies.
What the IMF meant to seek out from imposing the ncrease competitiveness,
efficiency, and entry into the international market. Additionaly, there were condtions
set on the monetary policy of Pakistan. These usually involved measures to support
the banking sector, stabilize exchange rates, and control inflation. The goals of these
conditions are to regain investor confidence and to regain economic stabiity.

There were not as many reforms needed for India in comparison to Pakistan
considering the conditions imposed on the governments. One of the reforms from the
conditions from the IMF which India had to do was Liberalization. Indias early
liberalization efforts with IMF engagement took place in the early 1990’s with
policies and conditions which included trade liberalization, deregualtion, and
privatization of public or state owned companies. The aim for this condition was to
lead india to a more market oriented economy. Another reform which the IMF put in
place was for India’s financial sector. The purpose and golas of this was to fix
banking laws, increase transparency, and bossting financial stability. These were often
parts of IMF programs in aiding India. One of the final things which the IMF always
wanted to aid India with was controlling exchange rates. The reason for IMF wanting
this to happen in India could be to maintain stabiltiy. As India is a major hub of
imports and exports having a stable economy and exchange rate will help them a lot

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as they can mitigate the prices during a crisis such as external shocks on import prices
which helps them to control inflation.

As there were goals set prior to IMF loans which are set by the IMF on a country. The
loan that the IMF lends leaves an impact on a country’s economy which will
somewhat show whether the loan was use appropriately and show how the
governments are using their finances on whether they are poor or good at controlling
finances. In Pakistan’s case the funds provided by the IMF did leave an impact as
these loans atleast temporarily at times helped the government of Pakistan to
restabilize their economy. The reason for this were the conditions imposed by the IMF
which were basically all based around economic reforms and restructuring to find a
new and better way to manage a country. Another thing which these loans conditions
had an impact on was the Pakistan’s foscal imbalances.as they were significamtly
improved. There was a downside to these conditions and reforms which took place as
there would always be some people who would face difficulties due to these short
term measures. These problem are most likely caused by job losses which happened
due to all the financial reforms, economic reforms, etc. One of the main positives
from the impacts these conditions was that these economic reforms caused by the IMF
helps regain investor confidence. This would help the government of Pakistan
stabilize its economy on a greater scale as these would lead to a greater amount of
foreign investment and quicker and better access to international markets. Over time,
this can lead to help pay for infrastructure improvements and lead economic growth.
Despite all the positives there are always consequences that follow. In this case, a
negative impact IMF conditions had were that it deepened economic gaps which
could potentially lead to destroying the middle class and would restrict the access of
these funds for the people who are most in need.

India also took away positives from the IMF loans that they took. Under IMF’s
financial aid and imposed conditions for economic reforms, India’s GDP grew a
decent amount and they were successful in having better and quicker access to
international markets. The liberalization measures helped India achieve economic
growth which was overall done by regaining investors confidence which lead to an
increase in investment as well as foreign investment. International market inclusion
helped them to increase competition in exports which helps India till this day as a
major exporter in international trade. These positives were accompanied by its
negatives. Similar to its neighbor Pakistan, India also faced deepening economic gaps
and and increase in income disparity as well as gaps in society in places such as rural
and urban areas. These were not the only negative impacts they faced, critics argued
that the IMF imposed conditions that increased inequality by favouring market
oriented measures over social welfare considerations. This would mean that the needy
may not have received the funding of the IMF appropriately. Another thing which was
argued by critics was that these IMF reforms and externally pushed adjustments
weakened India’s policy autonomy. The reason for that which they argued was that
these refroms did not relate to India’s national priorities and development goals.

The three IMF loans to India have only one thing in common, they all happened at
times of economic decline and external shocks, and each crisis needed aid.
To increase economic stability and integrity, the loans also came with requirements
meant to correct economic inequalities and encourage structural reforms.There were
differences in the three cases with regard to loan amounts, conditions imposed, and

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economic outcomes. Loan amounts which were decided by the urgency and how
severe the situation was but the US plays an important role in providing financial
assistance in the sector of agriculture and long term loans. Conditions imposed
differed according to policy objectives and the extent of the crisis, while loan amounts
were decided by the intensity of the crisis and India's finance needs. Mainly the IMF
imposed such type of conditions which managed the inflation,stabilize the economy
and proved beneficial in implementing different types of reforms.For Instance,In 1991
during the economic crises ,the conditions by IMF are to increase the foreign reserves
and implementation of monetary policy reforms.The various obstacles that India
encountered during each crises were shown by the impact of factors like the
effectiveness of policy and external shocks on economic outcomes. Given these
variations, IMF loans were important in helping to stabilize India's economy and
advance sustainable development.Also,the economic growth of India show a rise after
the independence.They grow in every sector such as making a advanced infrastructure
and made a industry which drives the economy towards the direction of positive
development.

IMF loans to Pakistan show commonalities, which show current economic difficulties
and intervention goals. The necessity of stabilizing the economy and implementing
reforms is consistently underlined by Pakistan's reliance on IMF support during times
of economic trouble, such as balance of payments crises, fiscal deficits, and external
shocks. IMF conditions, which usually focuses on financial consolidation, structural
reforms, and governance changes, is essential to these initiatives.These conditions are
implemented in order to peomote the long term growth in the country. In order to
solve structural flaws and create sustainable economic growth, Pakistan has so
implemented considerable policy changes, including fiscal adjustments, trade
liberalization, privatization initiatives, and improvements to the business
environment.Pakistan almost received $24 billion from the IMF since 1958.The
largest being taken by the Pakistan is in 2008 which worths $7.5 billion.But the issue
remains the same , Pakistan is continuously violating the term and conditions which
causes the high inflation.This inflation causes Pakistan to turn to IMF everytime and
get agreed on their term and condition in order to continue the loan agreements.On the
comparison with the India,Pakistan received loans multiple times due to their worst
economic conditions which is majorly due to the unstable governments in the history.
Still, there are significant variations in the IMF loans to Pakistan, which show varied
economic conditions and program details in various cases. The size and quantity of
loans has varied according to the extent of the crisis and the necessity for funding, and
the terms that have been placed on them have changed to meet particular difficulties.
A variety of factors, including the application of policies, external shocks, and
domestic dynamics, have affected the economic outcomes. While some programs had
difficulties with implementation and strength, others resulted in improved indicators
and short-term stabilization. The social effects of IMF programs have been
controversial, and governments have handled the consequences differently, ranging
from targeted social safety nets to budget cuts that negatively harm those most in
need.

Overall,both the countries involves in the agreements with the IMF but India shows a
positive growth in the last 10 years and Pakistan continuously dipping into the hole
which is created by the unstable governments.This makes the living of common
person much difficult due to surge in the prices of basic essentials.

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The introduction of changes asked by the IMF may be challenged by opposition from
political parties, labor unions, and civil society organizations, which can result in
protests, strikes, and political instability. Attempts to reach an agreement may also be
hampered by alliances and political division.Pakistan's economy is weakened by
strong structural flaws such as poor governance, corruption, and inefficiency in public
institutions. Significant reforms in fields such as tax administration, public
contracting, and judicial reform are important to address these issues.The root of these
issues is the unstability of governments in country.This is proved by history of each
government ,neither of the government completed their tenure of 5 years since the
independence of Pakistan.Pakistan's security issues, which include an uprising,
terrorist activities, and international conflicts, have the potential to slow down
economic operations, discourage investment, and affect attempts to stabilize the
economy. To bring in investment, boost tourism, and encourage economic growth,
security and stability are crucial.
IMF policies involving increase in power tariffs and reduction in subsidies may have
negative social effects, especially on people in need including the less fortunate,
women, and minorities. Initiatives to reduce poverty, protective measures for the most
weak, and customized social security networks are necessary to address the social
consequences of economic reforms.Pakistan's large levels of public debt, particularly
the promises it has, its external debt, and other debts, provide major challenges
to economic stability and fiscal stability. Programs funded by the IMF with the goal
of budget reduction and debt restructuring must carefully balance cutting debt with
preserving critical public services.External shocks can worsen economic weaknesses
and interfere with the execution of policies. Pakistan is sensitive to external shocks
such as swings in oil prices, worldwide economic recessions, and regional conflicts.
Increasing trade and investment links with a number of partners, diversifying the
economy, and decreasing reliance on imports are all necessary to increase resilience
to external shocks.Economic planning, tax collection, and social protection are
restricted by Pakistan's huge informal sector, which is distinguished by illegal work,
tax evasion, and a lack of rules. Targeted policies are needed to encourage
formalization, expand access to credit and financial services, and promote labor
market conditions in order to formalize the informal economy.Because of poor
infrastructure, poor management, and troubles with administration, Pakistan suffers
from a continual energy deficit, mainly in the power sector. Investments in energy
infrastructure, changes to policies that support energy conservation and efficiency,
and a change in the supply of energy toward sources that are environmentally friendly
are all necessary to address this issue.Also,the excessive printing of money to finance
the budget deficit continuously making a life difficult for Pakistan because it creates
inflation.

The federal system that governs in India, which gives state governments a lot of
power, can cause problems with communication and policy differences between the
federal and state governments. Effective policy implementation requires interaction
between the several levels of government and policy consistency.India has
problems in understanding how innovation and technology could lead to employment
growth, economic growth, and increased productivity. To fully realise India's
potential for innovation and improve its competitiveness in the global economy, it is
important to create environments for innovation, eliminate the gap between the
generations, and promote digital literacy.Governance and implementation are made

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difficult by India's wide sociopolitical diversity, which includes things such

as regional differences, social conflicts, and rural urban splits. Supporting suitable and
sustainable development involves adjusting policies to the particular requirements and
goals of many groups and areas.Trade unions, opposition parties, and interest groups
might reject IMF made changes if they believe they present a threat to social welfare
programs or traditional interests. Stakeholder interaction, collaboration, and effective
communication are very important to create agreement and win political support for
reforms.India has a lot of infrastructure limits that interrupt economic growth and
development. These include insufficient power supplies, poor transport systems, and
gaps in digital access. Fixing delays in the infrastructure requires a lot of money, new
financial management methods, and changes in legislation.Legislators face a
challenge in balancing the goals of fiscal austerity with the priority of social
consumption, including healthcare, social security, and education. It is important to
keep economic limitation while providing fair access to basic services.Also the they
are facing major challenges in managing and controlling the inflation.This is caused
due to very large amount of population which caused the government challenges to
made a reforms and subsidies for such a large population.The irregulation in these
policies made a life difficult for every individual which is living in the India.But on
the other hand,their industrial and development sector ia among the best sectors in the
World.

IMF policies do intend to bring a positive change in a country, but while the changes,
reforms, structural changes , etc. Also, no matter what changes occur whether how big
or how small a change is there will always be someone who is negatively imapcted
due to changes. In the case of Pakistan, there are a lot of rising critics who have an
argument that the IMF's Structural Adjustment Programs (SAPs) have an increased
the amount of poverty and inequalities in Pakistan. This critcism comes in accordance
with the previous points we have noted down. This points gave us nowledge about the
fact that IMF support depens economic gaps and causes income disparity. Putting all
of this together will show us that this is one of the downsides which is subject to
criticsm. Structural reforms can lead to unemployment as thre are a lot of new
methods in increasing efficiency. An example of this in the modern world would be
AI taking over jobs and increasing unemployment. So it is a fair argument to point out
increase in poverty. Another thing that is argued in Pakistan is that the IMF’s
conditionalities such as reducing subsidies, increasing tariffs have an impact on the
already poor. These similar IMF conditions with similar outcomes show that IMF use
a uniform approach which faces criticsm for not having many other ways. Also the
IMF receives criticism as their cosntant lending is leading to a very high dependancy
on foregin aid and IMF loans. Critics argue that this high dependancy on foreign aid
undermines economic sovereignty and preserves dominance in the international
market rather than fixing national policymaking. Another criticsm they face is fiscal
discipline. The argument they say is that this hinders Pakistan’s economic growth and
development. Fiscal discipline basically involves restructuring and reforms which
affects the economy. The argument provided is that the IMF’s conditions weakens the
country’s ability to have influene in international markets. The same applies to the
effects it has on bilateral rellations as countries may have divergent views of IMF
involvement in Pakistan.

Similarly, critics in India just like critics in Pakistan, have the same reasons for
criticising the IMF just like in Pakistan. In accordance with negative effects prior to

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this which mentioned how India faced a widening gap in income disparity which was
leading to problems in the country. This increasing gap increases poverty level and
shows how the people who need funds most are not benefiting from IMF loans.
Another crticism IMF gets is for increasing unemployment rates which also ends up
leading the Indian population to financial trouble for their basic needs. Fiscal
discipline was criticized for having structural reforms not in accordance with national
plans and goals. Also IMF lending leads to geopolitical problems in the international
market where countries have different opinions due to IMF control in the country. The
last problem which is criticized is for high dependancy on foreign aid following IMF
loans. This could give bad public sentiment just like for Pakistan. So both neighboring
countries despite their differences have a lot in common when it comes to the
criticzing the IMF. On the other hand, Pakistan has a lot more loans as India no longer
has loans.

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